Essay Q Document has the 3 questions. 

The rest of the documents are the readings you need to understand to answer the questions (each file is labeled for the question number)

Travel Stocks Hammered as Coronavirus Spreads Globally – WSJ https://www.wsj.com/articles/european-airline-stocks-tumble-as-coronav…

1 of 3 2/24/2020, 5:30 PM

Travel Stocks Hammered as Coronavirus Spreads Globally – WSJ https://www.wsj.com/articles/european-airline-stocks-tumble-as-coronav…

2 of 3 2/24/2020, 5:30 PM

Travel Stocks Hammered as Coronavirus Spreads Globally – WSJ https://www.wsj.com/articles/european-airline-stocks-tumble-as-coronav…

3 of 3 2/24/2020, 5:30 PM

Coronavirus’s Global Spread May Not Be Contained, WHO Says – WSJ https://www.wsj.com/articles/viruss-global-spread-may-not-be-containe…

1 of 3 2/24/2020, 5:28 PM

Coronavirus’s Global Spread May Not Be Contained, WHO Says – WSJ https://www.wsj.com/articles/viruss-global-spread-may-not-be-containe…

2 of 3 2/24/2020, 5:28 PM

Coronavirus’s Global Spread May Not Be Contained, WHO Says – WSJ https://www.wsj.com/articles/viruss-global-spread-may-not-be-containe…

3 of 3 2/24/2020, 5:28 PM

Journal

of Case Research Volume X Issue 01

Tesla: Disruptor or Sustaining Innovator

Dr. Salma Ahmad
Department of Business Administration, Aligarh Muslim University,

Email: salmaahmed6[at]rediffmail[dot]com

Mohd. Azmi Khan
Department of Business Administration, Aligarh Muslim University,

Email: azmikhan201[at]gmail[dot]com

Abstract

Tesla Inc (formerly Tesla Motors) is a pioneer of the first highway legal serial production all-

electric car to use lithium-ion battery cells. Tesla

launched Roadster, the first luxury electric

car in the world in 2008 which received a humongous response. Initially, the customers were

the affluent few. Tesla later launched less costlier versions such as the Model S, the Model-

X and the Model-3 to target the mass market. With the introduction of Roadster, Tesla did

not compete within the confines of the existing industry or attempt to steal customers from

the existing automobile rivals; but, developed an uncontested market space that made the

competition irrelevant. It created a Blue Ocean, a previously unknown market space. The

objective of the case is to develop conceptual clarity of what a Blue Ocean is, how it is

different from a Red Ocean, analyze whether Tesla created a Blue Ocean. The case would

also help discuss the future strategy for the company.

Key words: Blue Ocean, electric car, innovation, transformation, competition

Background of the Case

Across the world, people are

becoming increasingly concerned about

the environment. Sustainability has

become a buzz word in the corporate

sector as well as in academic literature.

People are becoming conscious of the

impact pollution has on the environment

and of the fact that transportation is a

major contributor to it. Transportation is

the second largest source of carbon

emission in the world. Electric vehicles1

(EVs) have zero emission potential as EVs

produce zero direct emissions and plug-in

hybrid electric vehicles (PHEV) produce

zero tail pipe emissions when they are in

all-electric mode, but they can produce

Journal of Case Research Volume X Issue 01

evaporative emissions. Powering EVs

through solar charging stations could

considerable reduce greenhouse gases

emission of vehicle. In 2008, Tesla Motors

launched Roadster, the first luxury electric

car. By the introduction of the first electric

vehicle, it created a Blue Ocean, a

previously unknown market space.

History of Electric Vehicles (EV)

The very first EV in a very crude

form was appeared on the road in 1902.

The credit for this can be attributed to

Walter C Baker. It was called the

This became quite popular and

many different versions appeared on road

until Henry Ford launched Model-T in

1908. Model-T was manufactured on the

assembly line, thus drastically lowering

the price of an automobile. Model-T made

automobiles affordable hich were earlier

only the prerogative of the rich and

affluent. Interest in EVs resurfaced in the

early 1970 s due to increasing fuel prices

and launching of NASA Lunar Roving

Vehicle which was an EV. It was round

this time that Sebring -Vanguard launched

an electric vehicle and became the 6th

largest automaker in the world in 1975.

However, due to the limitation of range as

compared to fuel-based cars, it gradually

lost its prominence by 1990s.

With environmental consciousness

gaining ground all over the world, interest

in EVs has grown. Government

regulations were also introduced in this

regard giving a further thrust to acceptance

of EVs. Automobile manufacturers started

launching EVs. Chrysler, Ford, GM,

Honda, Toyota all launched EVs for the

automobile market. Nissan Leaf was the

first all-electric, zero emission vehicle

produced for the mass market.

Since the introduction of electric

vehicle Tesla has come a long way. It

started with the launch of the Model S

which was very expensive but later it

launched low-cost versions for the mass

market. It has better acceptance than the

EVs which were launched earlier because

Tesla provides a larger driving range

,infrastructure for charging, facility for

free charging between cities, and also on

building back-up battery supply. It also

provides infotainment which is not an

essential feature of a vehicle but it is what

desire. Additionally, it has

adopted a unique distribution model of

both direct and online sales

Hybrid Electric Vehicles Vs. Plug-in

Hybrid Electric Vehicles

Hybrid Electric Vehicle (HEV) is a

vehicle that no longer depends solely on

Journal of Case Research Volume X Issue 01

the internal combustion engine (ICE) to

propel the engine, but rather uses an

electric motor to propel the vehicle using

electricity. While Plug-in Hybrid Electric

Vehicles (PHEVs), are also called range-

extended electric vehicles because the

vehicles always have gasoline as a

potential back-up that can extend the

driving range. are equipped with

a larger and more powerful battery

compared to HEVs which can be

recharged at the electricity grid. Both

HEVs and PHEVs are energy-efficient and

environment-friendly hybrid electric

vehicles that do not depend solely on an

internal combustion engine as their only

propulsion mechanism, instead they use

bidirectional power flow. However, they

have their fair share of differences in terms

of efficiency, operating cost, maintenance

cost, range, emissions, etc as shown in

Exhibit 1.

Tesla Motors-The Company

Tesla Inc is an American

multinational corporation which is

popularly known for the manufacture of

electric vehicles (EVs).Tesla Inc (formerly

Tesla Motors) was established in the year

2003. Based in Palo Alto, California, it

was founded by Martin Eberhard and Marc

Tarpenning who wanted to build cars for

people who had a passion for driving. In

2008, Tesla launched the first ever electric

car-the Roadster and gained popularity the

world over. Tesla, the company also

specializes in the manufacture of lithium-

ion battery energy storage, and residential

photovoltaic panels (through the

subsidiary company Solar City) energy

storage and solar panels. It also sells Tesla

Power wall and Power pack batteries, solar

panels, and solar roof tiles.

Tesla Motors started small with a

little over 80 employees, which included

teams in California, the United Kingdom,

and also Taiwan. The employees are

drawn from diverse industry and expertise

such as electronics, automotive, and

software.

The Product

Tesla offered different models such

as Roadster, and currently sells the Model

S, Model X, Model 3. The company is also

accepting bookings now for the upcoming

Model Y. The power of the car is derived

from its Lithium-ion Energy Storage

System, or a battery pack, which can be

charged in minimum time. These vehicles

conform to US safety standards,

environment, and durability standards. The

cars have in-built safety features like the

essential airbags, front crumple zones, side

impact protection, and 2 and ½ mph

bumpers.

Journal of Case Research Volume X Issue 01

Green Car-Green Initiative

Tesla is deep in the green car

industry. This is the untapped market

segment it is focusing on. It has devoted

all its research and development (R&D)

efforts for this purpose. Further, Tesla is a

pioneer and a market leader of EVs and

has about a five-year head start over other

companies. While other companies are still

evolving and developing their green car

designs, Tesla has already made a name

and a brand for itself. It is believed that

the future is of electric cars which would

be dependent on renewable sources of

energy and Tesla is all in to derive benefits

from this trend.

Transformation of the Auto-Industry

Tesla has had a significant impact

on the auto industry and has been able to

transform the auto industry. In time, all

automobile manufacturers would be

delivering EVs. Tesla has also introduced

the concept of self-driving. It would be

remembered as an innovator who

transformed the automobile industry, and

other automobile manufacturers followed

suit (see Exhibit-2). The first product

launched by Tesla was Roadster, which

was priced at $1,09,000. This was

prohibitively expensive for the common

man. As such, its target audience

(consumers) was only the affluent few,

who were conscious of eco-friendliness.

This included businessmen, politicians and

celebrities. Later, it launched other lower

priced brands. The Model-S was priced at

$69,900. This is the flagship

Model. The Model-X, and the Model-3,

priced at $35,000, followed. Model-3 is

aimed at a higher-volume segment. This

received huge acceptance. It delivered

around 1,03,000 vehicles in the fiscal year

2017 and 40,740 vehicles in the second

quarter of 2018, and during the third

quarter of 2018, Tesla delivered around

83,500 units, of which some 55,840 were

deliveries of Tesla’s Model 3, about 14,470

were Model S, and some 13,190 were

deliveries of Model X (see Exhibit-3).

Product Strategy

Tesla followed a strategy which is

typically adopted by the technological

industry where initially an expensive

product is launched targeting the affluent

buyers and then launching products for the

mass market. It followed a typical

technological-product life cycle. In the

words of its CEO Elon Musk,

technology in any field takes a few

versions to optimize before reaching the

mass market, and in this case, it is

competing with 150 years and trillions of

dollars spent on gasoline

Journal of Case Research Volume X Issue 01

Vertical Integration

The automobile industry is largely

dependent upon its component suppliers,

and only engine manufacturing and final

assembly are undertaken by the

manufacturer. Companies typically

outsource component production to the

extent of over 90 percent. Vertical

integration is, in fact, rare in the

automobile sector. In general, the auto

industry does not have a single source; an

OEM would have a range of suppliers.

production strategy

includes a high degree of vertical

integration. This includes component

production and proprietary charging

infrastructure. The company has large

factories to bring economies of scale. It

builds electric power train components for

vehicles from other automakers, like

Daimler AG, and Toyota. Tesla has a

limited number of suppliers and in most

cases, a single supplier for certain

components. Consequently, the company

has much more supply-chain volatility as

compared to most

automakers.

Sales Strategy

Automobile manufacturers have a

large network of dealers for distribution to

their customers. They are dependent upon

their dealers for sales of their products.

Rather Tesla does not resort to the

conventional norm of selling through an

extensive dealer network. It has adopted a

unique strategy and sells its vehicles

through company-owned showrooms as

well as online.

Technology Strategy

The focus of technology

strategy is on pure-electric propulsion. It

picks up approaches from the technology

industry and transfers them to the

transportation industry such as online

software updates.

Acquisition Strategy

Tesla acquired Solar City in the

year 2016. Through this it ventured into

the manufacturing of solar panels, solar

roof tiles, and battery storage. These

batteries complement the generation

profile of solar panels that charge only

during the day when the sun is shining. It

stores electricity for use on cloudy days

and at night, which is needed to provide

the on-demand electricity consumers are

used to.

The company has also set up a

large factory to produce battery at Nevada

in partnership with Panasonic. The plant

would undertake all aspects of battery

production, from raw material to battery

Journal of Case Research Volume X Issue 01

pack. Further, the company also intends to

sell its OEM batteries for non-automotive

applications to increase production volume

and reduce per unit cost of production.

Technical Differences

Model S, its first electric

vehicle, is unique. It has a 17-inch touch

screen infotainment system which has

become an industry benchmark for

automotive display integration. It also has

an optoelectronics display, which is the

same technology which is used in

smartphones and tablets. The system runs

on a Linux-based operating system which

offers navigation and also computes at a

speed which is at par with most other

systems. The system also includes an

embedded 3G modem that runs on

broadband data. This can receive software

updates over the air and controls all the

functions of infotainment, audio,

navigation, Bluetooth phone, and even

vehicle settings like windows, door locks,

sunroof, trunk release, traction control,

headlights, steering and also suspension

settings.

Further, a 12.3 inch fully digital

instrument cluster is placed in front of the

driver with a processor which is used to

handle a diverse range of graphics, and

content for the driver. The only familiar

driver components are the steering wheel,

pedals, and transmission shifter. The

system is a class of its own, and Tesla has

created a benchmark for the automobile

industry.

Manufacturing Model

Tesla has a unique manufacturing

model. It adopted the electronic

manufacturing services (EMS) model of

production that is a norm not in the

automobile industry but the consumer

electronics industry. Therefore, it is often

seen as being a technology company than

a traditional automobile company. It

entered into a contract with leading EMS

provider to build its central infotainment

system, instrument cluster, and several

other systems. This meant that Tesla

needed to internalize much of the

hardware and software development, and

the systems integration. The company had

an advantage in this regard as it had

recruited its engineers from all over

Silicon Valley. Since it adopts a design

and builds model, it has direct control over

the finished product, more control over the

user experience and over quality and

performance. This can be said to be its

competitive advantage.

Journal of Case Research Volume X Issue 01

Design Innovation

Tesla expedited the pace of

hardware, software, services, and

application development and re-think

design innovation. Tesla has a competitive

advantage over design innovation. It

recruited many design engineers from

various leading technology companies to

design and build the car. software

design is state-of-the-art. It can update

vehicle software over-the-air (OTA) with

ease. And as consumers and government

pursue eco-friendly and low-emission

transport options, Tesla stands to have an

upper hand.

Design thinking2 focuses on

customer needs and designs a product

accordingly. It can be said to be a

customer-focused innovation. Tesla has

embraced the concept of design thinking.

Tesla believes in re-designing a vehicle

about its energy source (electric) and its

driver (based on artificial intelligence). It

did not think about Tesla as a vehicle in

isolation but how the vehicle could impact

the planet. The EV is much more than

transportation. It is about creating a

sustainable planet. It thought about EV as

not something that functions within an

ecosystem but something that can

transform that ecosystem.

Tesla and Artificial Intelligence (AI)

Autopilot uses artificial

intelligence3 to drive a Tesla vehicle with

minimal assistance. This is also another

innovation that other automobile

manufacturers are trying to emulate and

trying to keep pace with the innovation of

Tesla.

Tesla has used machine learning4

in its Autopilot program. It used to it

handle a large amount of data created by

its fleet of vehicles and the Autopilot

sensor suite on those vehicles.

Customer Experience

Though the products offered, Tesla

is providing a different customer

experience that other automobile

manufacturers would find difficult to copy

and compete with. It is often said that

people are not buying when they

buy Tesla, but they are buying

experienc And the key elements of the

Tesla experience include the buying

process, the lack of refueling cost, the lack

of mandatory service checkups, the air

improvements, lower depreciation, and the

driving experience.

Journal of Case Research Volume X Issue 01

Tesla-An Innovator and Market Leader

Tesla, focus was on climate

change. Tesla is the key driver of

innovation, and these innovations have

been around sustainable mobility and

automotive technology. Consumers are

increasingly becoming conscious of using

environment friendly product, and Tesla

tapped on this sentiment and has become

one of the most recognizable brands in the

world. It has been rated as the best car

brand in terms of technology and

innovation (see Exhibit-4).

Investor confidence has also grown

and has resulted in an increase in its stock

prices by tenfold. It has become a leader,

and many companies are following its

lead. Due to its incredible market value,

people have included Tesla among the Big

Three. People have started calling Tesla,

GM, and Ford as the “New Big Three”. As

of 2017, Tesla was amongst the top 10

most valuable car brands worldwide,

valued at 4.4 billion U.S. dollars. The

reason why the automaker made it into the

ranking was large because of its top-

selling model, which is Model-S. The

model beat out decades of brand building

and production capacity of other giant

automakers.

Brian Loh, a partner at McKinsey

and Company, said, is at an

-time in the auto industry right

now, which is significant because

historically, the auto industry is very slow

to so much change

happening that the automakers are trying

to make sure as successful in the

next era as they were in the

electronics innovation trend with the

industry has been going on for a while, but

I think accelerating. The mega trends

we read about in the papers every day of

automotive driving, electrification,

connectivity, shared mobility. These are

huge industry-shaping trends, and they are

having a big impact in the industry at the

OEM level and the supplier level, and

leading to a lot of big And

Tesla has taken the lead, proved to be a

disruptive innovator and making the

industry to follow suit.

Tesla is today acknowledged being

one of the most technologically innovative

companies dealing with climate change.

The focus on environmental

sustainability, safety, and innovation made

its electric cars immensely popular and got

an overwhelming response. It is an

innovator, and this innovation is its

greatest strength. It has challenged the

Journal of Case Research Volume X Issue 01

norms and influenced and transformed

what kinds of cars other automobile

manufacturers should make. It has also

transformed what kind of cars consumers

should drive. Tesla has been an inspiration

in the industry and demonstrated that year-

old convention could be defied.

1 An electric vehicle (EV) is a vehicle which uses one or more electric motors for propulsion. EVs store
electricity in an energy storage device, such as a battery. Electricity can be used as a transportation fuel to power
battery electric vehicles (EVs).

2 Design thinking is process of creative problem solving. It has a human-centered core and encourages
organizations to focus the people needs..
3 Artificial intelligence (AI) is the ability of a digital computer or computer-controlled robot to perform tasks
commonly associated with intelligent beings.
4 Machine learning is an application of artificial intelligence (AI) that provides systems the ability to
automatically learn and improve from experience without being explicitly programmed.

Journal of Case Research Volume X Issue 01

Exhibit 1:

Hybrid Vehicles Plug-in Hybrid Vehicles
HEV is a vehicle whose propulsion energy is
acquired from more than two types of energy
sources, one of which is electric.

PHEVs are vehicles equipped with a large
battery which can be plugged into the
national grid or home outlets.

The battery can only be charged via
regenerative braking and can call on gasoline
to extend its range.

The battery can be charged via regenerative
braking as well as by plugging it in any
household 120-volt power outlet.

It reduces the toxic emissions by shutting
down the ICE at idle and restarting it when
needed.

Centralized electricity generation is much
more efficient and products.

Exhibit 2: Other automobile growing interest in electric vehicles

In 2014, Mercedes approved an investment of over US 4 2 billion for purpose-built electric

vehicles (Source: fool.com)

In 2014, General Motors announced an investment of US $ 449 million for the next generation

of electric vehicles and advanced battery technologies. (Source:gm.com)

In 2015, Ford announced a US $ 4.5 billion investment in EV technology and 13 new electric

models will be added by 2020. (Source: Ford Annual Report-2015)

In 2020, Volkswagen would be launching over twenty electric and plug-in hybrid electric

vehicles, ranging from small-sized cars to large SUVs in China, its largest market. (Source:

forbes.com)

Exhibit 3: Sales of Tesla depicting number of vehicles delivered worldwide

Source: www.statistica.com/statistics/502208/tesla-quarterly-vehicle-deliveries

Journal of Case Research Volume X Issue 01

Exhibit 4: Perception of best car brands (index score)

Vehicle Index Score %
Tesla 33.90

Mercedes Benz 19.70
Toyota 19.50
Ford 19.50

BMW 18.20
Cadillac 18.10

Audi 16.50
Lexus 16.50

Chevrolet 11.30
Acura 11.30

Source: www.statistica.com/statistics/303737/US-car-owner-perception-of-best-car-brands-
for-innovation/; Opinion Research Corporation, Consumer Union.

Exhibit 5: Tesla models specification with price

Models Acceleration Range Price

Model Y 3.5-5.9 seconds 280-300 miles $39,000-47,000

Model 3 5.1-5.6 seconds 220-310 miles $35,000-44,000

Model S 4.1-4.3 seconds 259-335 miles $69,500-97,500

Model X 2.7-6 seconds 200-325 miles $80,000-1,44,000

Roadster 4.2-8.8 seconds 620 miles $2,50,000-2,00,000

Source: www.tesla.com

Journal of Case Research Volume X Issue 01

References:

Autoportal (n.d.) Tesla model 3. Retrieved May 20, 2019 from

/www.autoportal.com/newcars/tesla/model-3/

CarandBike (Feb 9, 2019). Tesla model 3. Retrieved May 20, 2019 from

https://www.auto.ndtv.com/tesla-cars/model-3

Debord, M (2018, June 16). Elon Musk’s plans for Tesla keep getting weirder and it could put

the company’s future at risk. Retrieved May 20, 2019 from
https://www.businessinsider.in/Elon-Musks-plans-for-Tesla-keep-getting-weirder-
and-it-could-put-the-companys-future-at-risk/articleshow/64615205.cms

Domm, P. (2018, March 2). Electric vehicles: The little industry that could take a bite out of

oil demand. Retrieved from https://www.cnbc.com/2018/02/28/soon-electric-vehicles-
could-cause-an-oil-crisis-.html

Dutta, A. (2019, Feb 22). A deep dive into tesla business strategy. Retrieved from

https://www.feedough.com/tesla-business-strategy-and-business-model/

Electric car rivals revved up to challenge tesla. Retrieved from

https://www.ft.com/content/3f5ded00-bd7d-11e8-8274-55b72926558f

Ford (2015) Annual Report 2014-15. Retrieved February 2, 2019. www.ford.com/Ford

Annual Report-2015

Frangoul, A. (2018, Sept 4). Mercedes to launch an all-electric vehicle in challenge to tesla.

Retrieved from https://www.cnbc.com/2018/09/04/mercedes-to-launch-an-all-electric-
vehicle-in-challenge-to-tesla.html

Kim, T. (2018, Sept 18). UBS says new electric car shows industry has a long way to

go to catch Tesla. Retrieved from https://www.cnbc.com/2018/09/18/ubs-says-audis-
disappointing-electric-car-launch-is-a-big-win-for-tesla.html

3. Retrieved from https://www.businessinsider.in/These-6-electric-cars-will-pose-the-
biggest-threat-to-Teslas-Model-3/articleshow/62626679.cms

McCarthy, N. (2017, Aug 15). Tesla dominates the US electric vehicle market. Retrieved

from https://www.statista.com/chart/10684/tesla-dominates-the-us electric-vehicle-
market

Retrieved from https://www.medium.com/the-mission/teslas-simple-business-
strategy-you-can-implement-immediately-6d894796ac02

Journal of Case Research Volume X Issue 01

Rosenbaum, E. (2018, April 4). Tesla and China trade war: Elon belief China will
outsell US gets a new test. Retrieved from https://www.cnbc.com/2018/04/04/tesla-
and-china-trade-war-elon-musk-has-tough-tariff-riddle-to-solve.html

verything Tesla wants to accomplish by 2020.

Retrieved from https:// www.businessinsider.in/Heres-everything-Tesla-wants-to-
accomplish-by 2020/articleshow/59774818.cms

United States Environmental Protection Agency (n.d.). Sources of greenhouse gas emissions.

Retrieved May 20, 2019, from https://https://www.epa.gov/ghgemissions/sources-
greenhouse-gas-emissions

Walsh, T. (2014, Nov 1). Investing in socially responsible companies: Tesla motor Inc.

Retrieved from https://www.fool.com/investing/general/2014/11/01/investing-in-
socially-responsible-companies-tesl-2.aspx

World Health Organization (n.d). Climate Aspects. Retrieved May 20, 2019, from

https://https://www.who.int/sustainable-development/transport/health-risks/climate-
impacts/en/

Zucchi, K. (2018, Oc

https://www.investopedia.com/articles/active-trading/072115/what-makes-teslas-
business-model-different.asp

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Q4 and FY201

9

Update

Highlights 0

3

Financial Summary 0

4

Operational Summary 06

Vehicle Capacity 0

7

Core Technology 08

Other Highlights 09

Outlook 1

0

Photos & Charts 11

Financial Statements 20

Additional Information 25

20

19

was a turning point for Tesla. We demonstrated strong organic

demand for Model 3, returned to GAAP profitability in 2H19 and

generated $1.1B of free cash flow for the year. We achieved strong cash

generation through persistent cost control across the business.

Our pace of execution has also improved significantly, as we have

incorporated many learnings from our experience launching Model 3 in

the United States. As a result, we were able to start Model 3 production

in Gigafactory Shanghai in less than

10

months from breaking ground

and have already begun the production ramp for Model Y in Fremont.

None of this would be possible without strong demand for our

products. For most of 2019, nearly all orders came from new buyers

that did not hold a prior reservation, demonstrating significant reach

beyond those who showed early interest. Amazingly, this was

accomplished without any spend on advertising. As more people drive

our cars and as the industry rapidly validates electrification, interest in

our products will continue to grow.

Higher volumes driven by Model Y and Gigafactory Shanghai, continued

improvements in operating leverage, and further cost efficiencies should

allow Tesla to ultimately reach an industry-leading operating margin.

$930M increase in our cash and cash equivalents in Q4 to $6.3B

$1.0B operating cash flow less capex (“free cash flow”) in Q4

Cash

Model Y production ramp started in January 2020, ahead of schedule

Increased Model Y all-wheel drive EPA range to 3

15

miles from 280 miles

Record vehicle deliveries of 1

12

,095 in Q4

Record Q4 storage deployment of 530 MWh; 26% solar growth QoQ

Profitability $359M GAAP operating income; 4.9% operating margin in Q4

$105M GAAP net income; $386M non-GAAP net income (ex-SBC) in Q4

Operations

S U M M A R YH I G H L I G H T S

3

SBC = stock-based compensation expense

F I N A N C I A L S U M M A R Y

(Unaudited)

4

($ in millions, except percentages and per share data)

Q4-2018 Q1-2019 Q2-2019 Q3-2019 Q4-2019 QoQ YoY

Automotive revenues 6,3

23

3,724 5,376 5,353 6,368 19% 1%

of which regulatory credits 95

21

6 111

13

4 133 -1% 40%

Automotive gross profit 1,537 751 1,016 1,

22

2 1,434 17% -7%

Automotive gross margin 24.3% 20.2% 18.9% 22.8% 22.5% -31 bp -179 bp

Total revenues 7,226 4,541 6,350 6,303 7,384 17% 2%

Total gross profit 1,443 566 921 1,191 1,391 17% -4%

Total GAAP gross margin 20.0% 12.5%

14

.5% 18.9% 18.8% -6 bp -113 bp

Operating expenses 1,029 1,088 1,088 930 1,032 11% 0%

Income (loss) from operations 414 (522) (167) 261 359 38% -13%

Operating margin 5.7% -11.5% -2.6% 4.1% 4.9% 72 bp -87 bp

Adjusted EBITDA 1,039 155 572 1,083 1,175 8% 13%

Adjusted EBITDA margin 14.4% 3.4% 9.0% 17.2% 15.9% -127 bp 153 bp

Net income (loss) attributable to common stockholders (GAAP) 140 (702) (408) 143 105 -27% -25%

Net income (loss) attributable to common stockholders (non-GAAP) 345 (494) (198) 342 386 13% 12%

EPS attributable to common stockholders, basic (GAAP) 0.81 (4.10) (2.31) 0.80 0.58 -28% -28%

EPS attributable to common stockholders, basic (non-GAAP) 2.00 (2.90) (1.12) 1.91 2.14 12% 7%

Net cash provided by (used in) operating activities 1,235 (640) 864 756 1,425 88% 15%

Capital expenditures (325) (280) (250) (385) (412) 7% 27%

Free cash flow 910 (920) 614 371 1,013 173% 11%

Cash and cash equivalents 3,686 2,198 4,955 5,338 6,268 17% 70%

EPS = Earnings per share

F I N A N C I A L S U M M A R Y

Revenue

Profitability

Cash

In 2019, our revenue growth was positively impacted by a strong increase in vehicle deliveries. Revenue growth was offset by higher

lease mix*, Model 3 becoming a larger part of our mix, introduction of the Standard Range trims of Model 3, and adjustments to

vehicle pricing. These changes have resulted in a reduction to the average selling price (ASP) relative to 2018. We do not expect

ASP to change significantly in the near term, which means volume growth and revenue growth should correlate more closely this

year.

We are positioned to accelerate our revenue growth further through increasing build rates in Gigafactory Shanghai and our Mod el Y

production line in Fremont. These production increases will allow for higher total vehicle deliveries and associated revenue.

GAAP gross profit of $4.1B remained essentially flat in 2019 compared to 2018. Volume growth and successful cost reduction

efforts were offset by normalization of ASP, mix shift towards Model 3 and a higher lease mix.

Sequentially, GAAP gross margin remained relatively flat in Q4 compared to Q3, while we ramped Model 3 production at

Gigafactory Shanghai. While we saw an increase in operating expenses in Q4 (driven mostly by $72M of non -cash SBC expense

related to one more 2018 CEO award operational milestone becoming probable), higher gross profit resulted in a 72bp sequentia l

improvement of GAAP operating margin to 4.9% in Q4.

Quarter-end cash and cash equivalents increased by $930M QoQ to $6.3B, driven by positive quarterly free cash flow of $1.0B.

Capital expenditures increased sequentially due to investments in Gigafactory Shanghai and Model Y preparations in Fremont.

5
* Revenue on leased vehicles is recognized on monthly lease payments, and thus
contribute less to total revenues in the quarter of delivery than sold vehicles

In Q4, the annualized total vehicle production rate in Fremont was just over 415,000 units, about the same rate as the factory under NUMMI reached in its peak year of

2006. We achieved this production rate in spite of Model S/X running on a single shift and before the start of Model Y production.

Our finished vehicle inventory levels reached just 11 days of sales(1) at the end of Q4, the lowest level in the past 4 years.

Our Mobile Service fleet almost doubled in 2019 to 743 vehicles, and we continue to open new service locations globally. As customers are increasingly buying their Tesla

vehicles online, vehicle deliveries grew 50% while our retail footprint remained unchanged with a stable total store count across 2019.

Q4-2018 Q1-2019 Q2-2019 Q3-2019 Q4-2019 QoQ YoY

Model S/X production 25,161 14,163 14,517 16,318 17,933 10% -29%

Model 3 production 61,394 62,975 72,531 79,837 86,958 9% 42%

Model S/X deliveries 27,607 12,091 17,722 17,483 19,475 11% -29%

of which subject to lease accounting 3,639 1,363 1,820 2,588 2,807 8% -23%

Model 3 deliveries 63,359 50,928 77,634 79,703 92,620 16% 46%

of which subject to lease accounting 4,322 6,498 6,041 -7%

Global inventory (days of sales)(1) 19 30 18 17 11 -35% -42%

Solar deployed (MW) 73 47 29 43 54 26% -26%

Storage deployed (MWh) 225 229 415 477 530 11% 136%

Store and Service locations 378 377 402 413 429 4% 13%

Mobile service fleet 411 550 651 719 743 3% 81%

Supercharger stations 1,421 1,490 1,587 1,653 1,821 10% 28%

Supercharger connectors 12,002 12,767 13,881 14,658 16,104 10% 34%

1 The industry reference for days of sales is calculated by dividing new car inventory by the
trailing four quarters of deliveries and using 261 working days (source: Automotive News).6

O P E R A T I O N A L S U M M A R Y

(Unaudited)

Model 3 deliveries by region

V E H I C L E C A P A C I T Y

Fremont

The production ramp of Model Y started in January 2020. Together with

Model 3, our combined installed production capacity for these vehicles is now

400,000 units per year.

The ramp of Model Y will be gradual as we will be adding additional machinery

in various production shops. After such expansions are done by mid-2020,

installed combined Model 3 and Model Y capacity should reach 500,000 units

per year. We will start delivering Model Y vehicles by the end of Q1 2020.

Shanghai

We have been gradually ramping local production of battery packs since late

Q4 2019. The rest of the Model 3 manufacturing processes are running as

expected. Due to strong initial customer response in China, our goal is to

increase Model 3 capacity even further using existing facilities.

We have already broken ground on the next phase of Gigafactory Shanghai.

Given the popularity of the SUV vehicle segment, we are planning for Model Y

capacity to be at least equivalent to Model 3 capacity.

Berlin-Brandenburg

We are moving forward with our preparations near Berlin, which we have

selected as the right place to build vehicles for the European market due to a

strong manufacturing and engineering presence in Germany. The first deliveries

from this factory are expected in 2021.

Installed Annual Capacity Current Status

Fremont Model S / Model X 90,000 Production

Model 3 / Model Y * 400,000 Production

Shanghai Model 3 150,000 Production

Model Y – Construction

Berlin Model 3 – In development

Model Y – In development

North America

Tesla Semi – In development

Roadster – In development

Cybertruck – In development

* Model 3/ Model Y installed capacity in Fremont will extend to 500,000 by mid-2020

7
0

50,000

100,000

150,000

200,000

250,000

300,000

2017 2018 20

19

Other

Greater China

Europe

North America

C O R E T E C H N O L O G Y

Autopilot & Full Self Driving (FSD)

To date, Tesla vehicles have driven over 3 billion miles in Autopilot mode. As our fleet

grows, Autopilot miles increase exponentially, adding yet more data to our neural net.

All Tesla vehicles with our FSD computer have been updated with new software that

can better detect new details in their environments, allowing us to show various lane

markings, traffic lights, stop signs, cones as well as other vehicles and road users.

Understanding the environment around a Tesla is key to enabling our cars to react to

traffic lights and stop signs and take intersections through city streets. We are

currently validating this functionality before releasing to customers, and we look

forward to its gradual deployment.

Vehicle Software

In Q4, we launched premium vehicle connectivity in the US for $9.99 (plus tax) per

month. This enables our customers to stream music or videos, browse internet or see

live traffic through an embedded connection.

We also introduced in-app purchases, where our customers can buy various software

updates, such as basic Autopilot, FSD, acceleration boost and additional premium

features. Software will continue to play a growing role in our business model.

Battery & Powertrain

Due to continued engineering progress of the Model Y all-wheel drive (AWD), we

have been able to increase its maximum EPA range to 315 miles, compared to our

previous estimate of 280 miles. This extends Model Y’s lead as the most energy-

efficient electric SUV in the world.

In app purchases

Electric SUV energy efficiency (EPA miles per kWh)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

Model Y
AWD

Jaguar
iPace

Mercedes
EQC*

Ford
Mach E AWD

Audi
e-tron

8 *Tesla estimate

O T H E R H I G H L I G H T S

Energy Business

Energy storage deployment reached an all-time high of 530 MWh in Q4,

which included the first deployments of Megapack, our new commercial-

scale 3 MWh integrated storage system that is preassembled at Gigafactory

Nevada as a single unit. Since the introduction of this product, the level of

interest and orders from various global project developers and utilities has

surpassed our expectations.

In 2019, we deployed 1.65 GWh of energy storage, more than we deployed in

all prior years combined.

In Q4, we deployed 54 MW of solar, 26% more than in the prior quarter.

Where offered, subscription solar has grown significantly in Q4. With a

monthly subscription that can generate income from the first month of

usage, there is no reason not to have solar panels installed.

Solarglass Roof

In Q4, we continued to ramp both Solarglass Roof production as well as

installations. In addition to Tesla installers, we have also partnered with

several roofing companies to support installations to fulfill demand for

Solarglass Roof.

After organizing several roofing company training days at our training homes

in Fremont, we already demonstrated dramatically shorter installation times

versus previous versions of this product. Solarglass tiles are made in our

Gigafactory New York, and we are hiring hundreds of employees at this

facility.
Solarglass Roof installation

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2015 2016 2017 2018 2019

Energy storage deployed (in MWh)

9

O U T L O O K

Volume

Production ramp of Model Y in Fremont has begun, ahead of schedule. Model 3 production in Shanghai is
continuing to ramp while Model Y production in Shanghai will begin in 2021. We are planning to produce limited
volumes of Tesla Semi this year.

Cash Flow

Profitability

Product

For full year 2020, vehicle deliveries should comfortably exceed 500,000 units. Due to ramp of Model 3 in
Shanghai and Model Y in Fremont, production will likely outpace deliveries this year. Both solar and storage
deployments should grow at least 50% in 2020.

We expect positive quarterly free cash flow going forward, with possible temporary exceptions, particularly
around the launch and ramp of new products. We continue to believe our business has grown to the point of
being self-funding.

We expect positive GAAP net income going forward, with possible temporary exceptions, particularly around
the launch and ramp of new products. Continuous volume growth, capacity expansion, and cash generation
remain the main focus.

10

P H O T O S & C H A R T S

F R E M O N T F A C T O R Y – M O D E L Y B O D Y S H O P

12

F R E M O N T F A C T O R Y – M O D E L Y B O D Y S H O P

13

F R E M O N T F A C T O R Y – M O D E L Y B O D Y S H O P

14

March 2019 Prototype January 2020 Production vehicle

M O D E L Y – 1 0 M O N T H S F R O M P R O T O T Y P E T O P R O D U C T I O N S T A R T

15

Model 3 in Fremont, CA Model 3 in Gigafactory Shanghai

F R E M O N T F A C T O R Y L A Y O U T V S . G I G A F A C T O R Y S H A N G H A I L A Y O U T

16

Stamping

Body in white (welding)

P
a
in

t
s
h

o
p

G
e
n

e
ra

l
A

s
s
e
m

b
ly

(
G

A
4
)

General

Assembly

(GA3)

Stamping

Body in white (welding) Paint shop

General Assembly

–

0.8

–

0.6

–

0.4

–

0.2

0.0
0.2
0.4
0.6
0.8

1Q
-2

0

17

2
Q

-2
0

17

3
Q

-2
0
17

4
Q

-2
0
17
1Q
-2

0

18

2
Q
-2
0
18
3
Q
-2
0
18
4
Q
-2
0
18
1Q
-2

0
19

2
Q
-2
0
19
3
Q
-2
0
19
4
Q
-2
0
19

-1.5

-1.0

-0.5

0.0
0.5
1.0
1.5
1Q
-2

0
17

2
Q
-2
0
17
3
Q
-2
0
17
4
Q
-2
0
17
1Q
-2

0
18

2
Q
-2
0
18
3
Q
-2
0
18
4
Q
-2
0
18
1Q
-2
0
19
2
Q
-2
0
19
3
Q
-2
0
19
4
Q
-2
0
19
0

20,000

40,000

60,000

80,000

100,000

120,000

1Q
-2
0
17
2
Q
-2
0
17
3
Q
-2
0
17
4
Q
-2
0
17
1Q
-2
0
18
2
Q
-2
0
18
3
Q
-2
0
18
4
Q
-2
0
18
1Q
-2
0
19
2
Q
-2
0
19
3
Q
-2
0
19
4
Q
-2
0
19

Vehicle Deliveries (units) Net Income ($B)*

K E Y M E T R I C S Q U A R T E R L Y

(Unaudited)
17

Operating cash flow ($B)

Free cash flow ($B)

* Attributable to Common Stockholders

-3.0

-2.0

-1.0
0.0
1.0
2.0
3.0
1Q
-2
0
17
2
Q
-2
0
17
3
Q
-2
0
17
4
Q
-2
0
17
1Q
-2
0
18
2
Q
-2
0
18
3
Q
-2
0
18
4
Q
-2
0
18
1Q
-2
0
19
2
Q
-2
0
19
3
Q
-2
0
19
4
Q
-2
0
19

–

5.0

-4.0

-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
1Q
-2
0
17
2
Q
-2
0
17
3
Q
-2
0
17
4
Q
-2
0
17
1Q
-2
0
18
2
Q
-2
0
18
3
Q
-2
0
18
4
Q
-2
0
18
1Q
-2
0
19
2
Q
-2
0
19
3
Q
-2
0
19
4
Q
-2
0
19
0
50,000
100,000
150,000
200,000
250,000
300,000

350,000

400,000

1Q
-2
0
17
2
Q
-2
0
17
3
Q
-2
0
17
4
Q
-2
0
17
1Q
-2
0
18
2
Q
-2
0
18
3
Q
-2
0
18
4
Q
-2
0
18
1Q
-2
0
19
2
Q
-2
0
19
3
Q
-2
0
19
4
Q
-2
0
19

K E Y M E T R I C S T R A I L I N G 1 2 M O N T H S ( T T M )

(Unaudited)

Vehicle Deliveries (units)
Operating cash flow ($B)

Free cash flow ($B)
Net Income ($B)*

18
* Attributable to Common Stockholders

$(1.5)

$(1.0)

$(0.5)

$-

$0.5

$1.0

$1.5

0
20,000
40,000
60,000
80,000
100,000

120,000
1Q

-2
0
13
2
Q
-2
0
13
3
Q
-2
0
13
4
Q
-2
0
13
1Q
-2

0
14

2
Q
-2
0
14
3
Q
-2
0
14
4
Q
-2
0
14
1Q
-2

0
15

2
Q
-2
0
15
3
Q
-2
0
15
4
Q
-2
0
15
1Q
-2

0
16

2
Q
-2
0
16
3
Q
-2
0
16
4
Q
-2
0
16
1Q
-2
0
17
2
Q
-2
0
17
3
Q
-2
0
17
4
Q
-2
0
17
1Q
-2
0
18
2
Q
-2
0
18
3
Q
-2
0
18
4
Q
-2
0
18
1Q
-2
0
19
2
Q
-2
0
19
3
Q
-2
0
19
4
Q
-2
0
19

V E H I C L E D E L I V E R I E S & F R E E C A S H F L O W

(Unaudited)

Model 3 ramped to
5,000/week (250,000/year run

rate) at the end of Q2-2018

Operating cash flow ($B)
Free cash flow ($B)

Vehicle deliveries

19

F I N A N C I A L S T A T E M E N T S

Three months ending Year ending

In millions of USD or shares as applicable, except per share data 31-Dec-18 30-Sep-19 31-Dec-19 31-Dec-18 31-Dec-19

REVENUES

Automotive sales 6,074 5,132 6,143 17,632 19,952

Automotive leasing 249 221 225 883 869

Total automotive revenue 6,323 5,353 6,368 18,515 20,821

Energy generation and storage 372 402 436 1,555 1,531

Services and other 531 548 580 1,391 2,226

Total revenues 7,226 6,303 7,384 21,461 24,578

COST OF REVENUES

Automotive sales 4,659 4,014 4,815 13,686 15,939

Automotive leasing 127 117 119 488 459

Total automotive cost of revenues 4,786 4,131 4,934 14,174 16,398

Energy generation and storage 329 314 385 1,365 1,341

Services and other 668 667 674 1,880 2,770

Total cost of revenues 5,783 5,112 5,993 17,419 20,509

Gross profit 1,443 1,191 1,391 4,042 4,069

OPERATING EXPENSES

Research and development 356 334 345 1,460 1,343

Selling, general and administrative 668 596 699 2,835 2,646

Restructuring and other 5 (12) 135 149

Total operating expenses 1,029 930 1,032 4,430 4,138

INCOME (LOSS) FROM OPERATIONS 414 261 359 (388) (69)

Interest income 7 15 10 24 44

Interest expense (175) (185) (170) (663) (685)

Other (expense) income, net (14) 85 (25) 22 45

INCOME (LOSS) BEFORE INCOME TAXES 232 176 174 (1,005) (665)

Provision for income taxes 22 26 42 58 110

NET INCOME (LOSS) 210 150 132 (1,063) (775)

Net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests 70 7 27 (87) 87

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS 140 143 105 (976) (862)

Net income (loss) per share of common stock attributable to common stockholders

Basic 0.81 0.80 0.58 (5.72) (4.92)

Diluted 0.78 0.78 0.56 (5.72) (4.92)

Weighted average shares used in computing net income (loss) per share of common stock

Basic 172 179 180 171 177
Diluted 179 184 187 171 177

S T A T E M E N T O F O P E R A T I O N S

(Unaudited)
21

B A L A N C E S H E E T

(Unaudited)

In millions of USD 31-Dec-18 31-Mar-19 30-Jun-19 30-Sep-19 31-Dec-19

ASSETS
Current assets

Cash and cash equivalents 3,686 2,198 4,955 5,338 6,268
Restricted cash 193 131 128 233 246
Accounts receivable, net 949 1,047 1,147 1,128 1,3

24

Inventory 3,113 3,837 3,382 3,581 3,552
Prepaid expenses and other current assets 366 465 570 660 713

Total current assets 8,307 7,678 10,182 10,940 12,103
Operating lease vehicles, net 2,090 1,973 2,070 2,253 2,447
Solar energy systems, net 6,271 6,242 6,201 6,168 6,138
Property, plant and equipment, net 11,330 9,851 10,082 10,190 10,396
Operating lease right-of-use assets 1,253 1,248 1,234 1,218
Goodwill and intangible assets, net 350 348 481 537 537
MyPower customer notes receivable, net of current portion 422 413 400 398 393
Restricted cash, net of current portion 398 354 366 255 269
Other assets 572 801 843 820 808

Total assets 29,740 28,913 31,873 32,795 34,309

LIABILITIES AND EQUITY

Current liabilities

Accounts payable 3,405 3,249 3,134 3,468 3,771
Accrued liabilities and other 2,094 2,277 2,623 2,497 2,905
Deferred revenue 630 763 884 1,045 1,163
Resale value guarantees 503 480 527 441 317
Customer deposits 793 768 631 665 726
Current portion of debt and finance leases (1) 2,568 1,706 1,791 2,030 1,785
Total current liabilities 9,993 9,243 9,590 10,146 10,667

Debt and finance leases, net of current portion (1) 9,404 9,788 11,235 11,313 11,634
Deferred revenue, net of current portion 991 1,157 1,182 1,140 1,207
Resale value guarantees, net of current portion 329 211 61 38 36
Other long-term liabilities 2,710 2,476 2,656 2,676 2,655

Total liabilities 23,427 22,875 24,724 25,313 26,199
Redeemable noncontrolling interests in subsidiaries 556 570 580 600 643
Total stockholders’ equity 4,923 4,606 5,715 6,040 6,618
Noncontrolling interests in subsidiaries 834 862 854 842 849

Total liabilities and equity 29,740 28,913 31,873 32,795 34,309

(1) Breakdown of our debt is as follows:

Recourse debt 7,081 6,517 7,813 7,882 7,263
Non-recourse debt 3,552 3,486 3,553 3,857 4,538

22

Three months ending Year ending

In millions of USD 31-Dec-18 30-Sep-19 31-Dec-19 31-Dec-18 31-Dec-19

Cash Flows from Operating Activities

Net income (loss) 210 150 132 (1,063) (775)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation, amortization and impairment 497 530 577 1,901 2,154

Stock-based compensation 205 199 281 749 898

Operating cash flow related to repayment of discounted convertible notes (188)

Other 124 68 204 453 665

Changes in operating assets and liabilities, net of effect of business combinations 199 (191) 231 58 (349)

Net cash provided by operating activities 1,235 756 1,425 2,098 2,405

Cash Flows from Investing Activities

Capital expenditures (325) (385) (412) (2,101) (1,327)

Payments for the cost of solar energy systems, net (29) (25) (37) (218) (105)

Purchase of intangible assets (5)

Receipt of government grants 46 46

Business combinations, net of cash acquired (11) (76) (18) (45)

Net cash used in investing activities (365) (486) (403) (2,337) (1,436)

Cash Flows from Financing Activities

Net cash flows from debt activities (185) (19) (434) 37 378

Collateralized lease repayments (216) (83) (87) (559) (389)

Net borrowings under Warehouse Agreements and automotive asset-backed notes 193 148 321 596 470

Net cash flows from noncontrolling interests – Auto 38 30 19 112 35

Net cash flows from noncontrolling interests – Solar (18) (28) 6 92 (76)

Proceeds from issuances of common stock in public offerings 848

Other 76 71 96 296 263

Net cash (used in) provided by financing activities (112) 119 (79) 574 1,529

Effect of exchange rate changes on cash and cash equivalents and restricted cash (4) (12) 14 (23) 8

Net increase in cash and cash equivalents and restricted cash 754 377 957 312 2,506

Cash and cash equivalents and restricted cash at beginning of period 3,523 5,449 5,826 3,965 4,277

Cash and cash equivalents and restricted cash at end of period 4,277 5,826 6,783 4,277 6,783

S T A T E M E N T O F C A S H F L O W S

(Unaudited)
23

In millions of USD or shares as applicable, except per share data Q4-2018 Q1-2019 Q2-2019 Q3-2019 Q4-2019

Net income (loss) attributable to common stockholders (GAAP) 140 (702) (408) 143 105

Stock-based compensation expense 205 208 210 199 281

Net income (loss) attributable to common stockholders (non-GAAP) 345 (494) (198) 342 386

Net income (loss) per share attributable to common stockholders, basic (GAAP) 0.81 (4.10) (2.31) 0.80 0.58
Stock-based compensation expense 1.19 1.20 1.19 1.11 1.56
Net income (loss) per share attributable to common stockholders, basic (non -GAAP) 2.00 (2.90) (1.12) 1.91 2.14
Shares used in per share calculation, basic (GAAP and non-GAAP) 172 173 177 179 180

Net income (loss) attributable to common stockholders (GAAP) 140 (702) (408) 143 105
Interest expense 175 158 172 185 170

Provision for income taxes 22 23 19 26 42

Depreciation, amortization and impairment 497 468 579 530 577

Stock-based compensation expense 205 208 210 199 281

Adjusted EBITDA (non-GAAP) 1,039 155 572 1,083 1,175

Total revenues 7,226 4,541 6,350 6,303 7,384

Adjusted EBITDA margin (non-GAAP) (1) 14.4% 3.4% 9.0% 17.2% 15.9%

Automotive gross margin (GAAP) 24.3% 20.2% 18.9% 22.8% 22.5%

Total regulatory credit revenue recognized -1.1% -4.9% -1.7% -2.0% -1.6%

Automotive gross margin excluding regulatory credits (non-GAAP) 23.2% 15.3% 17.2% 20.8% 20.9%

R E C O N C I L I A T I O N O F G A A P T O N O N G A A P F I N A N C I A L I N F O R M A T I O N

(Unaudited)

(1) Adjusted EBITDA margin is Adjusted EBITDA as a percentage of Total revenues
1

24

In millions of USD 1Q-2013 2Q-2013 3Q-2013 4Q-2013 1Q-2014 2Q-2014 3Q-2014 4Q-2014 1Q-2015 2Q-2015 3Q-2015 4Q-2015 1Q-2016 2Q-2016 3Q-2016 4Q-2016
Net cash provided by (used in) operating activities (GAAP) 64 (38) 102 130 60 (2) (28) (86) (132) (160) (203) (30) (250) 150 424 (448)
Capital expenditures (58) (41) (76) (90) (141) (175) (284) (369) (426) (405) (393) (411) (217) (294) (248) (522)
Free cash flow (non-GAAP) 6 (79) 26 40 (81) (177) (312) (455) (558) (565) (596) (441) (467) (144) 176 (970)

In millions of USD 1Q-2017 2Q-2017 3Q-2017 4Q-2017 1Q-2018 2Q-2018 3Q-2018 4Q-2018 1Q-2019 2Q-2019 3Q-2019 4Q-2019
Net cash (used in) provided by operating activities (GAAP) (70) (200) (301) 510 (398) (130) 1,391 1,235 (640) 864 756 1,425
Capital expenditures (553) (959) (1,116) (787) (656) (610) (510) (325) (280) (250) (385) (412)
Free cash flow (non-GAAP) (623) (1,159) (1,417) (277) (1,054) (740) 881 910 (920) 614 371 1,013

In millions of USD 1Q-2017 2Q-2017 3Q-2017 4Q-2017 1Q-2018 2Q-2018 3Q-2018 4Q-2018 1Q-2019 2Q-2019 3Q-2019 4Q-2019
Net cash provided by (used in) operating activities – TTM (GAAP) 56 (294) (1,019) (61) (389) (319) 1,373 2,098 1,856 2,850 2,215 2,405
Capital expenditures TTM (1,618) (2,282) (3,150) (3,415) (3,518) (3,169) (2,563) (2,101) (1,725) (1,365) (1,240) (1,327)
Free cash flow – TTM (non-GAAP) (1,562) (2,576) (4,169) (3,476) (3,907) (3,488) (1,190) (3) 131 1,485 975 1,078

A D D I T I O N A L I N F O R M A T I O N

WEBCAST INFORMATION

Tesla will provide a live webcast of its fourth quarter and full year 2019 financial results conference call beginning at 3:30 p.m. PT on January 29, 2020, at ir.tesla.com. This webcast will also be available for replay for approximately

one year thereafter.

CERTAIN TERMS

When used in this update, certain terms have the following meanings. Our vehicle deliveries include only vehicles that have been transferred to end customers with all paperwork correctly completed. Our energy product

deployment volume includes both customer units installed and equipment sales; we report installations at time of commissioning for storage projects or inspection for solar projects, and equipment sales at time of delivery.

“Adjusted EBITDA” is equal to (i) net income (loss) attributable to common stockholders before (ii) interest expense, (iii) (benefit) provision for income taxes, (iv) depreciation, amortization and impairment and (v) stock-based

compensation, which is the same measurement for this term pursuant to the performance-based stock option award granted to our CEO in 2018.

NON-GAAP FINANCIAL INFORMATION

Consolidated financial information has been presented in accordance with GAAP as well as on a non-GAAP basis to supplement our consolidated financial results. Our non-GAAP financial measures include non-GAAP net income

(loss) attributable to common stockholders, non-GAAP net income (loss) attributable to common stockholders on a basic per share basis, Adjusted EBITDA, Adjusted EBITDA margin, free cash flow and non-GAAP automotive gross

margin. Management believes that it is useful to supplement its GAAP financial statements with this non-GAAP information because management uses such information internally for its operating, budgeting and financial planning

purposes. These non- as well as comparisons to the operating results of other companies. Management also believes that

presentation of the non-GAAP financial measures provides useful information to our investors regarding our financial condition and results of operations because it allows investors greater transparency to the information used by

Tesla management in its financial and operational decision-making so that investors can see through the eyes of Tesla management regarding important financial metrics that Tesla management uses to run the business as well as

-GAAP information is not prepared under a comprehensive set of accounting rules and therefore, should only be read in conjunction with financial information reported

-GAAP financial information is provided above.

FORWARD-LOOKING STATEMENTS

duction, volumes, demand, deliveries, pricing, features and/or timing of existing and future Tesla products

and technologies such as Model 3, Model Y, Tesla Semi, Cybertruck, Tesla Roadster, Autopilot and Full Self Driving features, in-vehicle software features, and our energy products such as Megapack, Solarglass Roof and subscription

solar; statements regarding market opportunities for Tesla products and services; statements regarding growth in service and repair capabilities; statements regarding revenue, expenses, cash availability and generation, cash flow,

gross and operating margin, spending, and profitability targets; statements regarding productivity improvements, cost reductions and capacity expansion plans; statements regarding construction, expansion, ramp and/or hiring at

the Fremont Factory, Gigafactory Shanghai, Gigafactory New York and a planned Gigafactory in Berlin, Germany, including cost, timing –

uncertainties. These forward- and uncertainties, actual results may differ materially from those projected. The following important

factors, without limitation, could cause actual results to differ materially from those in the forward-looking statements: the risk of delays in the manufacture, production, delivery and/or completion of our vehicles and energy

products and product features, including Model 3 and our autonomous driving features; our ability to grow our production, sales, delivery and servicing capabilities, and manage future growth effectively, especially internationally;

et acceptance of and demand for our vehicles, including future vehicle models such as Model Y; the

ability of suppliers to meet quality and part delivery expectations at increasing volumes, especially with respect to our high-volume models; our ability to sustain and further grow our ramp of battery cell, energy product and

product component production at Gigafactory Nevada; our ability to ramp Gigafactory Shanghai in accordance with our plans; any failures by Tesla products to perform as expected or if product recalls occur; our ability to continue

to reduce or control manufacturing and other costs; competition in the automotive and energy product markets generally and the alternative fuel vehicle market and the premium vehicle markets in particular; our ability to execute

on our evolving strategy for product sales, service, charging and other customer infrastructure; the unavailability, reduction or elimination of government and economic incentives for electric vehicles and energy products; potential

difficulties in performing and realizing potential benefits under definitive agreements for our existing and future manufacturing facilities; our ability to attract and retain key employees and qualified personnel; our ability to maintain

the security of our information and product systems; our compliance with various regulations and laws applicable to our operations and products, which may evolve from time to time; risks relating to our indebtedness and financing

strategies; and adverse foreign exchange movements. More information on potential factors that could affect our financial results is included from time to time in our Securities and Exchange Commission filings and reports,

-Q filed with the SEC on October 29, 2019. Tesla disclaims any obligation to update information contained in these forward-

looking statements whether as a result of new information, future events, or otherwise.
25

TSLA

–

US

365 Days 365 Days

365 Days 365 Days 365 Days 366 Days 365 Days 365 Days

-14.94 -21.31 -43.63 -23.11 -88.84

-18.69 -227.22 -118.03 –

4.39

28.97

28.97 30.66

13.32 12.21

-14.25

-9.18

8.22 8.91

9.96

0.09

0.09 0.03

-3.68 -2.51

-4.68 -6.93 -2.36 -0.62

-1.63

7.25

8.29 7.25

2.14 2.18

177.00 170.53 165.76 144.21 128.20 124.54 119.42 107.35 100.39 94.91

94.91

3.35

0.86

2.51

2.41 2.89 1.83 1.55 1.35 1.43

1.23

0.66 0.69

0.95 0.94 1.60

0.46 0.46

0.77 1.14 0.45 0.37 0.45

0.77 0.74 0.46 0.46 0.58 0.77 1.14 0.45 0.37 0.45

-2.71 -4.68 -18.79

-23.09

-3.55 -95.84 -124.32 -132.05

-2.69 -3.34 -7.64

-12.75 -7.11 -4.19 -43.36 -46.28 -59.76

5.26

4.46 5.24

-14.94 -21.31 -43.63 -23.11 -88.84 -37.25 -18.69 -227.22 -118.03 -113.16

-14.94 -21.31 -43.63 -23.11 -88.84 -37.25 -18.69 -227.22 -118.03 -113.16

1.72 0.92

0.01

21.63 29.31 23.18 20.96 20.46 23.20 53.02 22.72 25.14 22.90

6.15 6.48 4.41 3.26 2.80 3.58 5.12 2.41 2.99 2.51

5.84

4.49

5.42

3.35 3.47

Asset Turnover (x) 0.77 0.74 0.46 0.46 0.58 0.77 1.14 0.45 0.37 0.45

– –

–

–

12.45

6.88

1.13

0.86 1.07

1.88 0.97

1.07

2.23

0.39 0.46

0.43

1.26

3.66

0.74

0.05 0.42

6.05

–

–

– – –

0.11

3.26

1.29

0.11 2.02

0.11 -0.35 -2.75 -2.81 -4.83 -1.94 -2.39 -50.20 -48.90 -81.94

3.51 3.16

-0.62

2.97

2.80

0.86

4.58

-1.33 -1.33 -0.62

-0.41

0.16 0.15 -0.01 -0.01 -0.18 -0.02 0.43 -0.57 -0.41

		Tesla Inc
TSLA 88160R101 B616C79 NASDAQ Common stock
Source: FactSet Fundamentals
DEC ’19	DEC ’18	DEC ’17	DEC ’16	DEC ’15	DEC ’14	DEC ’13	DEC ’12	DEC ’11	DEC ’10
							365 Days		366 Days
Profitability (%)
Gross Margin	16.56	18.83	18.85	22.20	22.82	27.57	22.66	7.28	3	0.16	26.32
SG&A to Sales	16.23	2	0.01	32.78	32.07	41.99	3	4.46	25.70	102.68	153.29	152.10
Operating Margin	0.33	-1.18	-13.93	-9.86	-19.16	-6.89	-3.04	-95.41	-123.13	-125.78
Pretax Margin		-2.71			-4.68		-18.79	-1	0.66		-23.09	–	9.96		-3.55		-9	5.84		-124.32		-132.05
Net Margin	–	3.51	-4.55	-16.68	-9.64	-21.96	-9.19		-3.68	-95.88	-124.56	-132.19
Free Cash Flow Margin	3.96	-1.03	-35.22	-22.35	-53.37	-32.12	-0.31	-122.28	-15	2.89	-199.78
Return on Assets (%)		-2.69		-3.34		-7.64	–	4.39		-12.75		-7.11		-4.19		-43.36		-46.28		-59.76
Return on Equity (%)				-14.94				-21.31				-43.63				-23.11				-88.84		-3		7.25				-18.69				-227.22				-118.03			-11	3.16
Return on Common Equity		-37.25
Return on Total Capital				0.37			-1.33	-1	0.15	-7.46	-2	0.95	-9.45	-6.57	-71.98	-64.17	-84.77
Return on Invested Capital	-4.89	-6.21		-14.25	-8.70	–		28.97	-14.60	-8.21	-76.83	-65.69	-89.24
Cash Flow Return on Invested Capital	13.63	1		3.35	-0.44	–	1.60	-17.10	-2.85	28.63	-51.60	-29.53	-73.91
Valuation (x)
Price/Sales	3.01	2.64	4.40	7.60	8.66	8.92	8.80	14.04	21.65
Price/Earnings	-85.90	-58.14	-26.32	-45.66	-34.63	-94.24	-242.63		-9.18	-1	1.29	-16.34
Price/Book Value	11.44	11.67	12.40	7.26		30.66	27.76	31.02		13.32		12.21
Price/Tangible Book Value		12.45	12.56	13.77	7.89	28.35	35.03
Price/Cash Flow	30.79	27.05	-850.87	-248.86	-58.67	-483.09	69.63	-1	3.66	-25.07	-19.77
Price/Free Cash Flow	76.10	-255.96	-12.46	-19.70	-26.96	-2,883.54	-7.20	-10.84
Enterprise Value/EBIT	1,067.41	-272.04	-38.20	-59.04	-42.88	-129.32	-298.20	-1		0.43	-11.78	-16.53
Enterprise Value/EBITDA	3	8.22	41.73	-37,170.31	15	8.91	-94.27	2,491.94	407.91	-1	1.26	-12.63	-17.82
Enterprise Value/Sales		3.47	3.20	5.32	5.82	9.08	14.50	20.79
Total Debt/Enterprise Value	0.17	0.20	0.19	0.21			0.09		0.03				0.11
Per Share
Sales per Share	138.86	125.85	7	0.94	48.54	31.56	25.68	16.86	3.85	2.03		1.23
EBIT (Operating Income) per Share							0.45	-1.48	-9.88	-4.79	–	6.05	-1.77	-0.51	-3.67		–		2.51	–	1.55
EPS (recurring)	-4.12	–	5.26	-11.86	-5.04		-6.93		-2.36				-0.62		-1.63
EPS (diluted)	-4.87	-5.72	-1	1.83	-3.69	-2.53
Book Value per Share	36.56	28.52	25.10	29.42		8.29		5.42	1.09		2.14		2.18
Tangible Book Value per Share	33.60	26.49	22.60	27.09	5.31		0.97
Cash Flow per Share	13.59	12.30	-0.37	–			0.86	-4.09	–							0.46	2.16	-2.48	–			1.14	–	1.35
Free Cash Flow per Share	5.50	-1.30	-24.99	-10.85	-16.84	-8.25	–	0.05	-4.71	-3.11	-2.46
Diluted Shares Outstanding		177.00		170.53		165.76		144.21		128.20		124.54		119.42		107.35		10	0.39			94.91
Basic Shares Outstanding
Total Shares Outstanding	181.00	172.60	168.80	161.56	13	1.43	125.69	123.09	114.21	104.53
Asset Turnover Analysis (x)
Cash & ST Investments	4.73	5.80		2.97	2.57	2.31	3.76	1.57	0.96
Receivables		21.63		29.31		23.18		20.96		20.46		23.20		53.02		22.72		25.14		22.90
Inventories		6.15		6.48		4.41			3.26			2.80		3.58		5.12			2.41		2.99
Current Assets	2.25		0.92	0.67		0.69
Fixed Assets			1.07	1.04		1.72	2.39
Total Assets						0.77				0.74			0.58
DuPont Analysis
	Asset Turnover (x)
x Pretax Margin (%)	-10.66	-9.96
= Pretax Return on Assets (%)	-2.08	-3.44	-8.61	-4.85	-13.40	-7.70	-4.05	-43.34	-46.19	-59.69
= Return on Assets (%)	-4.39
x Equity Multiplier (Assets/Equity)	5.55	6.37	5.71	6.97		5.24	2.55	1.89
= Return on Equity (%)
= Reinvestment Rate (%)
Note: EBIT Return on Assets (%)	0.25	-0.87	-6.38	–	4.49	-11.12	-5.33	-3.47	-43.15	-45.74	-56.86
Note: Interest as % Assets	2.00		2.23	1.64	0.88	1.47	0.02	0.26
Operating Efficiency (x)
Revenue/Employee (actual)	511,871	439,627	313,208	233,143	309,850	314,768	343,659	139,425	144,137	129,860
Net Income/Employee (actual)	-17,952	-19,995	-52,244	-22,478	-68,055	-28,938	-12,633	-133,675	-179,542	-171,666
Assets/Employee (actual)	714,533	609,206	763,268	754,840	619,732	575,657	412,516	375,908	503,492	429,457
Receivables Turnover (x)
Inventory Turnover (x)
Payables Turnover (x)	6.31		4.58	4.07	5.36	4.90
Working Capital Turnover (x)	17.12	16.19	2.93	3.41		1.13	0.78
Operating Cycle (Days)
Days of Inventory on Hand	59.31	56.33	82.84	112.11	13	0.42	101.94	71.36	151.73	12	1.88	145.14
+ Days of Sales Outstanding	1	6.88	15.75	17.42	17.84	15.73	16.07	14.52	15.94
= Operating Cycle	76.19	68.79	98.58	129.53	148.27	117.67	78.24	167.80	136.40	161.08
– Days of Payables Outstanding	62.51	57.89	79.66	81.26	89.70	67.39	68.04	109.06	105.25	74.43
= Net Operating Cycle	13.68	10.90	18.92	48.26	58.57	50.28	10.20	58.74	31.15	86.65
Liquidity (%)
Current Ratio	0.83	0.99	1.52	1.95	2.76
Quick Ratio	0.80	0.52	0.56	0.72	0.54	1.37	0.48	1.69
Cash Ratio	0.61	0.60	0.91	0.41	1.59		2.02
Cash & ST Inv/Current Assets (%)	53.82	46.69	53.62	55.90	43.69	60.14	67.06	42.11	81.48	73.41
CFO/Current Liabilities (%)	22.55	20.99	-0.79	-2.13	-18.62	-2.72	38.21	-49.36	-59.77	-149.38
Coverage (x)
Net Debt/EBITDA	6.04	-5,114.45	19.85	-4.82	48.82	-5.40	-0.67	0.10
Net Debt/(EBITDA-Capex)	10.27	-14.82	-2.11	-4.30	-0.85	-0.58	1.10			-0.41
Total Debt/EBITDA	8.39	33.49	216.95	13.55
EBIT/Interest Expense (Int. Coverage)		-0.35		-2.75		-2.81		-4.83		-1.94		-2.39		-50.20		-48.90		-81.94
EBITDA/Interest Expense	2.49	-0.00	-2.97	-1,438.81	-5,455.09	-137.31
Fixed-charge Coverage Ratio
CFO/Interest Expense	-0.13	-4.41		-0.57	11.66	-1,047.56	-2,659.63	-128.85
LT Debt/EBITDA	5.65	6.74	-6,626.31	28.79	-6.48	161.70	13.37	-1.13	-1.16	-0.53
Net Debt/FFO	4.88	19.74	8.93	-54.43	-1.46	-0.80	0.12
LT Debt/FFO	5.45	25.58	12.96	-73.17	9.27	3.61
FCF/Total Debt	0.07		-0.02	-0.34		-0.18	-0.74			-0.01	-1.08	-1.11	-3.21
CFO/Total Debt	-1.76
Leverage (%)
LT Debt/Total Equity	190.80	225.79	263.19	155.40	209.72	202.94	89.79	329.96	121.03	34.93
LT Debt/Total Capital	59.24	59.28	68.13	55.35	56.99	54.51	47.02	69.58	53.78	25.86
LT Debt/Total Assets	36.80	37.38	38.92	32.59	28.22	31.63	24.78	36.93	38.01	18.73
Total Debt/Total Assets	42.84	46.49	42.33	37.91	36.06	42.44	25.11	41.88	39.27	18.81
Net Debt/Total Equity	123.65	202.08	203.14	107.16	155.99	61.28	-36.28	197.02	-10.56	-48.56
Total Debt/Equity	222.08	280.86	286.29	180.77	267.98	272.27	90.97	374.23	125.04	35.07
Net Debt/Total Capital	38.39	53.06	52.59	38.17	42.39	16.46	-19.00	41.54	-4.69	-35.96
Total Debt/Total Capital	68.95	73.74	74.11	64.38	72.82	73.14	47.64	78.91	55.56	25.96
All figures in millions of U.S. Dollar except per share and labeled items.

FI1405US

IND

2.83 2.64 3.14 5.56 4.40 2.31 3.30 4.80 5.34 4.82

4.82

1.34

-0.51

7.13

–

4.80

0.51

0.51 0.49

1.73

1.73

4.66 3.99

6.62 7.18

0.49

5.70

1.63 1.81

2.64 2.61

DA

4.77

Total Debt/EBIT

8.85

3.67

4.13

4.93

13.72

3.92

0.01

5.22

7.62

14.25

23.23

	United States / Motor Vehicles	–
FI1405US
Source: FactSet Market Aggregrates
DEC ’19	DEC ’18	DEC ’17	DEC ’16	DEC ’15	DEC ’14	DEC ’13	DEC ’12	DEC ’11	DEC ’10
Profitability (%)
Gross Margin	10.36	10.72	1		1.73	15.32	13.86	11.10	12.13	13.36	13.85	13.82
Operating Margin		2.83			2.64		3.14		5.56		4.40		2.31		3.30			4.80		5.34			4.82
Net Margin	3.00	1.19	3.20	6.29	3.74	3.53	11.08	8.26	5.81	4.08
EBIT Margin
EBITDA Margin	10.81	10.07	10.41	11.80	9.44	6.64	7.52	8.90	9.45	10.20
Return on Assets	1.88	0.75	2.02	4.33	2.70	2.74	8.96	6.82		5.22	3.37
Return on Equity	1	1.34	12.68	25.45	17.42	14.95	56.10	37.70	31.08	35.54
Return on Invested Capital		3.67	1.46		3.99	8.86	5.75	5.96	19.00	16.50	11.46	7.90
Free Cash Flow Margin		–		0.51	-2.25		0.01	1.64	1.40	2.22	2.32	3.71
Valuation (x)
Price/Earnings	1	7.13	35.83	16.32	12.97	14.37	4.44	4.58	5.04	1	1.63
Price/Earnings (excl negatives)		8.85	9.85	5.20	9.64	11.60	3.88	4.35	11.26
Price/Sales	0.43	0.52	0.45			0.49	0.38	0.29	0.47
Price/Book Value	1.94	2.07		1.81	2.26	2.15	2.49	1.57		4.13
Price/Cash Flow		4.66	4.00	5.31	4.15	5.07		6.62		7.18	5.23		4.93	6.94
Price/Cash Flow (excl negatives)	3.55	4.14	3.91	4.99	4.72	6.77
Price/Free Cash Flow	38.25	-83.03	–	23.23	-87.82	8,167.06	30.93	35.04	17.09	1	2.61	12.79
Enterprise Value/EBIT	40.51	40.61	35.77	16.99	20.91	36.64	23.54	12.38	9.12	14.29
Enterprise Value/EBITDA	10.61	10.65	10.80	8.01	9.76	12.73	10.33	6.67	5.15	6.76
Enterprise Value/Sales	1.15	1.07	1.12	0.94	0.92	0.85	0.78	0.59	0.69
Coverage (x)
Net Debt/EBITDA		5.70	6.28	4.20	4.59	4.89	3.40	1.96
Net Debt/(EBITDA-Capex)	54.06	-56.01	-35.01	100.58	-306.76	52.52	12.34	4.50
	Total Debt/EBIT	7.71	8.27		7.62	5.85	6.65	8.10	6.39		4.77	4.10
29.45	31.52	25.21	12.41		14.25	23.32	14.55	7.26	10.10
EBIT/Interest Expense (Int. Coverage)	3.25	9.25	9.58	9.55	10.29	9.34		3.92
EBITDA/Interest Expense	14.02	12.37	13.67	19.63	20.52	14.20	21.77	19.09	16.53	8.29
CFO/Interest Expense	14.45		13.72	18.66	21.54	16.86	20.26	15.76	10.56	5.59
LT Debt/EBITDA	5.12	5.68	5.29	4.63	5.37	5.13	3.17	3.39	3.94
Net Debt/FFO	543.79	565.99	481.24	473.04	506.31	314.47	322.91	197.66	232.03	-3,057.18
LT Debt/FFO	488.05	512.03	447.10	441.97	510.03	345.88	487.82	319.09	482.09	-6,643.35
FCF/Total Debt	1.61	-0.62	-2.84	-0.74	3.05	2.93	6.00
CFO/Total Debt	13.21	12.83	12.43	15.65	15.27	14.27	17.03	15.35	14.04
Leverage (%)
LT Debt/Total Equity	209.15	231.27	218.14	187.14	203.15	151.03	195.28	128.50	171.19	350.05
LT Debt/Total Capital	50.36	52.95	52.71	49.36	51.81	46.08	56.93	43.74	55.75	66.76
LT Debt/Total Assets	34.67	36.10	34.76	31.87	31.47	27.71	31.19	28.75	33.16
Total Debt/Total Assets	52.26	52.56	50.01	47.54	45.25	41.78	38.82	35.03	34.78	40.20
Total Debt/Total Equity	315.29	336.77	313.87	279.14	292.13	227.73	243.05	193.77	207.10	424.31
Net Debt/Total Capital	56.11	58.53	56.73	52.83	51.43	41.90	37.68	27.10	26.83	30.72
Total Debt/Total Capital	75.92	77.10	75.84	73.62	74.50	69.49	70.85	65.96	67.44	80.93

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Are you willing to sit through ads in streaming video services to avoid paying for

subscriptions? How much does the content offered matter? Join the conversation

below.

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4 of 4 2/24/2020, 5:25 PM

1. Read the information on the STREAMING VIDEO INDUSTRY and apply the elements of PESTEL analysis, PORTER analysis, and STRATEGIC GROUPS analysis.

a. What are the strategically relevant components of the streaming video industry macro-environment? What is the impact of these macro factors on the growth and competitiveness of the industry.

b. Work through each of the vertical and horizontal forces in the Porter model and draw conclusions about rivalry and industry competition. Which of the five competitive forces is strongest? Which is weakest? What competitive forces seem to have the greatest effect on industry attractiveness and the potential profitability of new entrants?

2. Read the information on the impact of the coronavirus and apply the elements of macro environmental and industry level analysis to understand how it impacts the industry forces (PORTER model) for two industries. Go through the forces model, then draw conclusion about whether this will increase or decrease competitiveness and attractiveness in this industry

3. Read the information on Tesla (attached documents). In one reading, Tesla is called either a disrupter or a sustaining innovator. This article also suggests that Tesla maybe a Blue Ocean or a Red Ocean (more traditional strategy) company. How do you interpret Tesla’s strategy? Use information from the articles, the most recent earnings presentation, and your evaluation of company financial performance in supporting your answer.

Red Ocean Strategy Blue Ocean Strategy

Compete in existing market space

Create uncontested market space.

Beat the competition

Make the competition irrelevant

Exploit existing demand

Create and capture new demand

Make the value-cost trade-off

Break the value-cost trade-off

Align the whole system of a firms activities with its strategic choice of differentiation or low cost

Align the whole system of a firms activities in pursuit of differentiation and low cost